"Engagement ads," Facebook and a wobbly market

Posted on | August 21, 2008 | 4 Comments

Online advertising, more than a decade into its existing, is wobbling thanks to two big issues

• The global economy is slowing and struggling
• The proof points with regard to online advertising effectiveness are lacking

Overall online advertising projections have been scaled back this year. What’s more, eMarketer reported this week that video ads will be a $505 million business this year. That would be good if eMarketer just six months hadn’t forecast the market to be $1.4 billion. That’s still nothing to sneeze at and it’s still up 56 percent over last year.
Alana Semuels, writing in the L.A. Times, paraphrased eMarketer analyst David Hallerman:

Complaining about an online-ad slowdown is like griping about a slugger who is on pace for 40 home runs after hitting 50 last year.

Nevertheless, there’s a problem here, despite eMarketer’s insistence that the numbers collapse was due to “changes in methodology.” ROI has not been proven yet. Banner ad click-throughs are effectively dead (unless you’re in the direct-response business). Site sponsorships and microsites have had inconsistent results (and can be expensive to develop).
To try to push the conversation ahead, Facebook is rolling out engagement ads, which are a way to add social functionality to ads. Jeremiah Owyang of Forrester Research broke and analyzed the story.

“To combat dismal click through rates of traditional advertisements, these features emulate widgets and encourage users to increase member adoption, viral growth, and brand interaction. Brands will only succeed with these “WidgetAds” if they create content that puts community first…”

Facebook stumbled badly with its Beacon advertising program last year, so time will tell whether this strategy plays out. On its face, engagement is where advertising is moving. Troy Young, the CMO at our client, VideoEgg, was among the first to sound the drumbeat months ago, and he’s also called for better performance-based ads.

But at the end of the day, there’s a larger problem. Online advertising isn’t fun right now. Television advertisers have had to adapt to TiVO nation by creating much more clever ads in recent years (often, the ads are more entertaining than the program they’re sponsoring!)
Troy’s spot on about this:

Focus less on the immediate action and more on immediate enjoyment. After all, isn’t this is what brand advertising is all about?

Today, 14 years after the Web went commercial, it’s time for advertising to “get over” online technology and get its groove on. Otherwise it just continues to be an annoying site feature searching for its place in the world.

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